Dr. Kazutomo IRIE 11 May 2016 Canberra, Australia

1.Introduction

3 Background: Launching of OGSI In 2014, APERC proposed the Oil and Gas Security Initiative (OGSI) to succeed the Oil and Gas Security Exercises (OGSE). This proposal was approved by EWG48 and endorsed by EMM11. At EMM11: APEC Energy Ministers instructed “the EWG and APERC to continue cooperation on emergency response, with the International Energy Agency (IEA), ASEAN, the Economic Research Institute for ASEAN and East Asia (ERIA) and other international/regional organizations.” Ministers also encouraged “member economies to conduct oil and gas security exercises on a voluntary basis, establish an APEC oil and gas security frameworks and do research on oil and gas security, so as to improve the capacity of the APEC region to respond to emergencies such as disruptions in oil and gas supply.”

4 Background: Three Pillars of OGSI

5 2.OGSI Activities

6 OGSE – Exercise Model Procedure (EMP) APERC published in November 2015 the Oil and Gas Security - Exercise Model Procedure (OGS-EMP), which is a step-by-step approach on oil and gas emergency exercises. Through the OGS-EMP, APERC aims to encourage and guide economies in the implementation of emergency exercise. The OGS-EMP is a working document, and will be updated based on the learning experiences to be obtained in future OGSE

7 OGSE – The Philippines Exercise The Philippines hosted the 3 rd Oil and Gas Security Exercise, which was the 1 st exercise under OGSI, on 7-9 December A 10-member Experts Review Team from APEC member economies (U.S. Japan and Korea) and international/regional organizations (IEA, ERIA, ACE, ASCOPE, and HAPUA) joined the Exercise The OGS–EMP was used in the exercise for the first time. From the Philippines side, around 35 representatives from relevant government agencies and the private companies participated in the Exercise.

8 OGSE – The Philippines Exercise Three stages of the emergency scenario were presented: First Stage of Scenario Natural gas supply disruption due to accident when a cargo ship sank after collision, and hit the underwater gas pipeline causing leaks. The pipeline leaks resulted in total shutdown of the primary source of natural gas, the Malampaya gas field. The Malampaya gas field fuels three gas power plants with aggregate capacity of 2,861 MW. These gas power plants provide 25% to total power generation mix of the Philippines.

9 OGSE – The Philippines Exercise Second Stage of Scenario Oil supply emergency resulting from a super typhoon that hit the Philippines and caused damaged to Petron oil refinery facility located in Bataan province, south of Manila. Petron oil refinery is the largest refinery in the economy contributing about 60% to total refinery production, or 30% of oil products supply.

10 OGSE – The Philippines Exercise Third Stage of Scenario Further aggravates the oil supply situation as the major source of petroleum products imports, Chinese Taipei, was also hit by the same typhoon that damaged the Petron refinery plant. Said typhoon caused damage to the two refinery facilities of Chinese Taipei. Chinese Taipei decided to cut down its exports by 30% due to shutdown of its two refinery facilities. This resulted in additional 9% loss in total oil products supply.

11 OGSE – The Philippines Exercise Based on the oil and gas emergency supply scenario, the Philippines has considered the following: Update the Oil Contingency Plan formulated in 2002; Draft the National Contingency Plan for gas; Establish a good communication plan; Revisit existing policies and regulations and assess if they may cause barriers in providing immediate response to emergency situations; and, Explore possibility for bilateral or multilateral agreement on emergency supply sharing (other than APSA), among others.

12 OGSE – Next Candidate Economy Possible economies to hold the next OGSE Australia in late October 2016 Peru in 2017 Other APEC member economies are being encouraged to hold an emergency exercise in order to improve performance and capacity of the system and personnel to be more effective in dealing with oil and gas supply disruptions. Source: Philippines Exercise, APERC, 2015

13 OGSN – OGS Forum APERC conducts Oil and Gas Security Forum - An annual event that serves as a venue to gather and share information and experiences among APEC members and international experts oil and gas supply security and emergency responses. Second OGS Forum was held on March 2016 in Kagoshima, Japan Representatives from 19 APEC member economies and experts from international/regional organizations joined the forum. A special workshop session on risk management approaches to energy security was conducted by Australia during the forum.

14 OGSN – Newsletter APERC also publishes the OGS Newsletter on a bi-monthly basis and circulated to EWG and OGSN members Contents of the Newsletter Oil update Gas update Middle East update Interview with experts Forthcoming events First OGS Newsletter was released in December To date, nine newsletters were circulated, the last one was distributed in April 2016

15 OGSS – Studies In the 1 st Phase, APERC already published six studies in November 2015 Oil Supply Security and Emergency Policy in the APEC Region The Impact on Oil Distribution by the Great East Japan Earthquake, and Future Issues and Countermeasures The Energy Reform in Mexico Prospects and Compromise Points of the Arab Spring Petroleum Product Trading and Security Melting of the Arctic Sea Ice

16 OGSS – Studies In the 2 nd Phase, three research studies were undertaken and two* of them will be published in 2016 ISIS and its Risk for APEC* Fuel Supply in a Possible Emergency Situation* Energy Security Indexation In the 3 rd Phase, the Energy Security Indexation will continue to be studied along with new research topics. Impact of Low Oil Price on Energy Security Gas Emergency Preparedness Geopolitical Implications of Iran Nuclear Agreement The Energy Security Indexation intends to (1) identify important issues that may pose a risk to the energy supply security; and, (2) to assess those issues relative to the level of risk they pose.

17 3.Way Forward

18 Emergency mechanisms and contingency plans seem to be the core issues for OGSI New/Broadened OGSI? Report on Voluntary Oil/Gas Stockpiling Target Report on substitutes for oil/gas stockpiling (lease of surplus stockpiling capacity, ticket system, etc.) Proposals on emergency supply sharing system (bilateral or sub-regional agreements) Procedures for APEC-wide Meeting on Emergency Supply Sharing (when needed) Supply proposal on energy resources complementary to oil/gas Needs for further studies on appropriate level of stockpiling, or possible issues on supply sharing system. Next Steps for OGSI

Thank you for your kind attention